Accounting for Net Income/Loss of a Partnership & Partnership Financial Statements

E12-5. Youssef (beginning capital, $60,000) and Kito (beginning capital, $90,000) are partners. During
2019, the partnership earned net income of $80,000, and Youssef made drawings of $18,000, while Kito
made drawings of $24,000.
Instructions:
A. Assume the partnership income-sharing agreement calls for income to be divided 45% to Youssef
and 55% to Kito. Prepare the journal entry to record the allocation of net income.
B. Assume the partnership income-sharing agreement calls for income to be divided with a salary of
$30,000 to Youssef and $25,000 to Kito, with the reminder divided 45% to Youssef and 55% to
Kito. Prepare the journal entry to record the allocation of net income.
C. Assume the partnership income-sharing agreement calls for income to be divided with a salary of
$40,000 to Youssef and $35,000 to Kito, interest of 10% on beginning capital, and the reminder
divided 50%-50%. Prepare the journal entry to record the allocation of net income.
D. Compute the partners’ ending capital balances under the assumption in part (c).
Ex. 12.6. for National co. beginning capital balances on January 1, 2019, Youssef Nasr $20,000 and Ali Afifi
$. During the year drawing were Youssef $8,000 and Ali $5,000. Net income was $40,000, and the partners
share income equally.

Instruc ons : 1. Prepare the partners’ capital statement.

2. Prepare the owners’ equity sec on of the balance sheet at Dec. 31, 2019.

P12-2A At the end of the first year of operation on December 31, 2019, NBS Company’s account show the
following.

Partner Drawings Capital Instructions:

(a) Journalize the entry to record the division of the net income for the
Youssef 23,000 48,000 year 2019 under each of the following independent assumptions.
Ali 14,000 30,000 1. Net income is $30,000. Income is shared 6:3:1.
2. Net income is $40,000. Youssef and Ali are given salaries
Kito 10,000 25,000 allowances of $15,000 and $10,000, respectively. The remainder is
shared equally.
The capital balance represents 3. Net income is $19,000. Each partner allowed interest of 10% on
each partner’s initial capital beginning capital balances. Youssef is given salaries allowances
investment. Therefore, net of $15,000. The remainder is shared equally.
income or net loss for 2019 has (b) Prepare a schedule of the division of net income under assumption 3.
not been closed to partners’ (c) Prepare a partners’ capital statement for the year under assumption 3.
capital accounts.

Admission of a new partner

E12-11. Kito, Ali and Youssef share income on a 5:3:2 basis. They have capital balances of $34,000, $26,000,
and $21,000, respec vely, when Don Adam is admi ed to the partnership.
Instruc ons: prepare the journal entry to record the admission of Don Adam under each of the following
assump ons:
A. Purchase of 50% of Kito’s equity for $19,000. B. Purchase of 33⅓% of Youssef ’s equity for $9,000.

E12-12. Kito and Youssef share income on a 6:4 basis. They have capital balances of $100,000, and $60,000,
respec vely, when Ali A is admi ed to the partnership.
Instruc ons: prepare the journal entry to record the admission of Ali A under each of the following
assump ons:
A. Investment of $90,000 cash for a 30% ownership interest with bonus to exis ng partners.
B. Investment of $50,000 cash for a 30% ownership interest with bonus to the new partner.
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